Pass Christian, Mississippi Wal-Mart’s BP Oil Spill Claim Award Affirmed
BP Expl. & Prod. v. Claimant ID100354107, 948 F.3d 680 (5th Cir. 2020).
By:Roy E. Lambert
In June 2015, Wal-Mart filed aclaim under the British Petroleum (“BP”) Deepwater Horizon oil spill “Economicand Property Damages Class Action Settlement Agreement”.[1]The Settlement Program classified Wal-Mart as a startup business and awarded nearly$1 million. BP disagreed with this classification and appealed the award after itwas affirmed by an appeal panel.
In 2003, Wal-Mart opened a“supercenter” in Pass Christian, Mississippi. The store remained opened untilHurricane Katrina destroyed the store in August 2005. In October 2009, thestore reopened, and on April 20, 2010, the Deepwater Horizon drilling rigexploded in the Gulf of Mexico. After the oil spill, BP entered into theSettlement Agreement with entities that suffered spill-related economic losses.
According to the SettlementAgreement framework, businesses can be classified into a number of categories,including one for normal “Business Economic Loss” (“BEL”) and another for“Start-Up Business Economic Loss” (“SBEL”).[2]Businesses can submit claims for economic loss, which are computed by comparingactual profits during a selected post-spill Compensation Period. The twooptions a claimant may select for a Compensation Period are between May 2010and December 2010 (regular BEL claims) or between May 2010 and April 2011 (SBELclaims).[3]Under the regular BEL framework, damages are calculated by expected profitsbased upon financial history. Recognizing that a startup business lacks suchfinancial history, the SBEL framework provides for a post-spill “BenchmarkPeriod.” In contrast to regular BEL claimants, SBEL claimants would recover byshowing that their profits during the oil spill year were less than theirprofits the subsequent year. A claimant does not have the option to choosewhether to file a claim as a BEL or SBEL claim. Instead, the SettlementAgreement defines a startup business as one with “less than 18 months ofoperating history at the time of the Deepwater Horizon Incident.”[4]
Wal-Mart filed an SBEL claim inJune 2015 for the Pass Christian store, and it was awarded $817,392 as astartup business. In its appeal, BP argued that Wal-Mart opened in 2003 andshould not have been classified under the SBEL framework. An appeal panelaffirmed the award, which prompted BP to appeal that decision in districtcourt; however, the district court declined discretionary review. BP timelyappealed to the United States Court of Appeals for the Fifth Circuit.
The Fifth Circuit observed that thedefinition of “Start-Up Business” in the Settlement Agreement is subject to tworeasonable interpretations: less than eighteen months of total operatinghistory or less than eighteen months of continuous operating history prior tothe spill. Rejecting BP’s argument that a blanket rule should apply for anybusiness that commenced operations more than eighteen months before the spill,the court observed that the agreement was silent on how to treat businesseswith two operating histories and two commencement dates. The Fifth Circuit subsequentlylooked to the intent of the Settlement Agreement, which instructs a claimsadministrator to select the framework and information that will “produce thegreatest economic damage compensation amount.”[5]The court held that the panel’s discretionary decision was not incongruent withthe language of the Settlement Agreement.
BP argued that because there was arecurring issue, refusing discretionary review was improper. The Fifth Circuitagreed that even if the appeal panel did not contradict or misapply theSettlement Agreement, there could still be abuse of discretion if the courtignored a split among panels based on the issue presented. Nevertheless, thecourt ultimately agreed with Wal-Mart, holding that there was no split“involving claims truly analogous to this claim and the specific factssurrounding it.”[6] In otherwords, the cases BP argued were indicative of a split were factuallydistinguishable from the case at issue; there was no actual split.
[1] BP Expl. & Prod. v. Claimant ID100354107, 948 F.3d 680 (5th Cir. 2020); see generally In reDeepwater Horizon, 785 F.3d 986 (5th Cir. 2015) [hereinafter SettlementAgreement] (describing the Settlement Agreement).
[2] Id.
[3] Id.at 686.
[4] BP Expl.& Prod. v. Claimant ID 100354107, 948 F.3d 680, 685 (5th Cir. 2020).
[5] Id.at 688.
[6] Id.at 689.
